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Mitigating the Covid Impact: the Hospitality Insurance Case in South Africa

This year has certainly gotten all of us unprepared. But few, if any, will not agree that for the hospitality industry the blow has been the hardest. According to the American Hotel and Lodging Association (AHLA), over 70% of US hotels will have to close their doors forever in the next half a year, should the government covid relief prove to be insufficient. The situation elsewhere is quite similar. In Africa tourism accounts for 7.1% of total GDP and contributes $169 billion to the continent’s economy, and over eight million of direct jobs have already been lost to the global pandemic, according to the World Travel and Tourism Council. What is the insurer’s role in the issue and could something positive be done about this tally?

Fedhasa, the South African national trade association for the hospitality industry recognized by the government as the official representative of the sector, has recently condemned Santam, a large financial services group, for filing an appeal against the decision by the Western Cape High Court requiring the insurer to pay full Business Interruption losses to Ma-Afrika Hotel. Settling claims has always been a fiery business, as payment policies specifically for the hospitality industry are notorious for being hard to follow for those relatively unfamiliar with the financial services sector. With covid squeezing travel and tourism businesses out of the game on daily basis, stakes are high, and more and more people begin to side with the insureds.

As a consequence, some hotels decide to take matters in their own hands. The number of properties seeking lower rates by asking for increased deductibles and planning on managing some tough situations like fires on their own is rising steadily. On the other hand, many insurers find themselves uncapable of providing quality service to their hospitality clients at the moment and either exit the market altogether or severely restrict the underwriting criteria. As if this was not bad enough, the accommodation industry is also facing double-digit rate increases in property, general liability and umbrella. It does indeed look like the pandemic has rapidly changed the dynamic between the financial services companies and their clients.

So, is there anything insurers can do to support the hospitality industry? John Welty, president of SUITELIFE Underwriting Managers, a division of Ryan Specialty Group, advises carriers to focus majorly on the post-covid hotel customer experience. While this is perhaps a sober idea, for the majority of travel and tourism professionals with one foot in the abyss it seems untimely to say the least – many of them will not even survive to provide that customer experience, should their Business Interruption claims fail to get settled.

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